We study the dependence of incentives for product innovation on the presence, or absence, of parallel trade. The common … assertion is that the presence of parallel trade lowers the incentive for product innovation. Our results support this assertion …

-post welfare properties but leads to lower investment ex ante. Conversely, when differential pricing is cost-based, uniform pricing … has bad ex-post welfare properties but leads to higher investment ex ante …

effect of the investment decision on transport costs biases empirical results. The empirical estimations rely on newly … the endogeneity of the investment decision. Our results confirm that transport prices are influenced by both the distance …